Visa Cryptocurrency Stock

Here’s Why Visa Is One of the Best Long-Term Stocks to Buy

Here's Why Visa Is One of the Best Long-Term Stocks to Buy
Written by publishing team

If you are like millions of people, you have already used a file Visa (NYSE: V) card of the day. This outreach is what makes Visa stand out as a business that investors want to be a part of.

The payments network took a big hit during the early stages of the pandemic, when consumer spending fell. But it is booming along with the economy, and this is where its strength lies. As the world’s largest credit card network, they turn a profit when you swipe your card, making this excellent company a sure bet for long-term growth.

Image source: Getty Images.

make payments

The Visa network facilitates payments from consumers to merchants and charges a small fee for each transaction. The sheer number of people using Visa credit cards demonstrates the company’s dominance of the market – there are currently 3.6 billion Visa cards in use, which translates to nearly half of the world’s population. In 2019, Visa processed more than 200 billion transactions, or more than $11 trillion in volume.

Since the Visa model is a platform, it is a high-margin business that converts sales into profits easily. Operating margin exceeded 66% in the third quarter, and Visa turned $6.1 billion in revenue into $2.6 billion in net income. It also generated more than $4 billion in free cash flow, which it uses to grow its business as well as pay dividends and share buybacks.

Business declined during the height of the pandemic restrictions, but recovery is in full swing. Revenue for the company’s fiscal third quarter, which covers the period ending June 30, was 27% higher than the same period in 2020, but 10% above pre-pandemic 2019 levels.

As the pandemic has been so bizarre, we can see Visa’s strength more clearly in its long-term growth. As of the fourth quarter, Visa has grown revenue at a 9.5% compound annual growth rate (CAGR) over the past five years, and net income at a better rate of 14.3%.

fintech revolution

One of the ways Visa is protecting its number one position in credit card processing is by getting and closing deals with fintech partners. Its proposed acquisition of Plaid, a private company that connects financial apps to institutions, has been called off after it was rejected by regulators. But it has made several small acquisitions to grow its business and especially to remain relevant as digital payments become more important. Recently, it acquired Currencycloud, an app that simplifies foreign exchange to facilitate cross-border payments. In the third quarter, it also announced that it would acquire Tink, a Sweden-based open banking platform.

Visa needs to upgrade their systems like businesses PayPal Collectibles Make it easy to send and spend money digitally. Contactless payments are becoming increasingly popular, and in the US alone Visa customers own more than 370 million Tap-to-pay cards. Installment plans have also been launched with companies such as Postpaid (Recently acquired by Square) And Confirmed collectibles Demonstrating strong growth, Visa has launched its own version as well.

Investors Reward

At Monday’s prices, Visa stock has gained nearly 190% over the past five years, nearly double Standard & Poor’s 500 index. While it lags behind the broader market over the past year, it is still nearly 15% higher as it has handled the weight of the pandemic. Its dividend yields 0.55% at the current price, well below the S&P 500 average, but the company has raised its payout annually since 2008.

Since it generally reflects the state of the economy, which expands exponentially by time rather than decades, Visa is a great long-term stock to own. Its top position makes it difficult to compete with, and it can provide security and stability for a well-balanced portfolio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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